Insurer urges credit unions to tighten up on security

20.03.2006
An insurance firm is calling on the 5,500 credit unions it works with to immediately adopt a set of security measures in an effort to curb growing losses from credit and debit card fraud.

The insurer, CUNA Mutual Group, last week released a nine-page document detailing 13 broad security measures and more than 70 specific recommendations for credit unions that issue cards. For instance, it's recommending that credit unions do round-the-clock monitoring of transactions and develop automated capabilities for immediately acting on fraud alerts.

CUNA Mutual isn't making adoption of the security guidelines a requirement for its credit union customers. But the company will factor in what each credit union does to fight fraud when underwriting insurance polices in the future, said Chris Ryan, director of credit union protection at the Madison, Wis.-based insurer.

"What's driving this is the significant increase in fraud losses that we have seen across the credit union marketplace over the last 18 months," Ryan said. He added that credit unions and CUNA Mutual suffered a combined total of about US$100 million in losses from credit and debit card fraud last year -- up 15 percent from 2004 and 50 percent from 2003.

Steve Swofford, CEO of Alabama Credit Union in Tuscaloosa, said his organization has implemented or is in the process of implementing most of the security measures prescribed by CUNA Mutual. Even so, ACU this year for the first time expects to file claims to cover its losses from credit and debit card fraud, he said.

"We've never been able to claim insurance, because our losses were relatively low," he said. But this year's fraud losses likely will exceed ACU's deductible for such coverage, according to Swofford.